2025 (1) TMI 435 - AT - IBC

Admission of section 7 application - Prayer for initiation contempt proceedings for violation of order - time limitation - HELD THAT - The present Contempt Application has been filed on 16.06.2024, i.e. within a period of one year, the Contempt Application, which alleges violation of order dated 13.01.2021 by the order of Adjudicating Authority dated 24.08.2023 needs to be heard on merits, it having been filed within one year from passing of the order dated 24.08.2023. It is proceeded to consider the Contempt Application filed by the Applicant on merits. The Applicant has rightly filed Application with respect to other Projects, i.e. Sneh Project and Samhita Project for deciding upon the CIRP cost of the Applicant, which Application was wrongly rejected by the Adjudicating Authority. It is submitted that the Adjudicating Authority while passing the order dated 24.08.2023 for initiating CIRP with regard to Project Samhita of the CD, has violated the order dated 13.01.2021. Hence, both the Members of the Adjudicating Authority, who are Respondent Nos.1 and 2 need to be proceeded under the Contempt of Courts Act, 1971. The Applicant submits that the present RP, who is appearing in CP(IB) No. 84 of 2019 is misconducting himself and not taking steps to pay the CIRP costs to the Applicant. Various fraudulent activities are being undertaken by present RP - Shri K.P. Raju. The Applicant submits that order dated 24.08.2023, by which the CIRP has been initiated against another Project of CD, i.e. Samhita Project is in violation of order dated 13.01.2021. Hence, both the Members of the Adjudicating Authority be proceeded under the Contempt of Courts Act. The law is well settled that civil contempt under Section 2(b) of the Contempt of Courts Act must be wilful and where there is deliberate flouting of the orders of the Court, the Court may initiate action. On looking into the facts of the present case, the Adjudicating Authority has passed order dated 24.08.2023 on an Application filed by Apartment Buyer s Consumer Association seeking initiation of CIRP with respect to Project Dreamz Samhita. The Adjudicating Authority after finding debt and default has admitted Section 7 Application and directed the CIRP to commence with respect to Project Dreamz Samhita. While admitting Section 7 Application, which was filed by Financial Creditors in a class, no contempt can be said to have been committed by the Adjudicating Authority, who was exercising its statutory jurisdiction under Section 7 of the IBC, while admitting Section 7 Application filed by the Financial Creditors in a class. It has already been held by Adjudicating Authority and affirmed by this Tribunal that Applicant for his unpaid CIRP costs has to approach in CP(IB)No.84/BB/2019 in which CIRP, the Applicant was appointed as RP by order dated 17.12.2019, which order was subsequently set aside on 13.01.2021 by this Tribunal. In the present case, the facts and sequence of events and various orders passed have already been noticed above and it is clear that Adjudicating Authority while passing the order dated 24.08.2023 has not disobeyed any directions, nor circumvented any proceedings. Conclusion - Thus, no contempt has been committed by Adjudicating Authority in admitting Section 7 Application by order dated 24.08.2023 with respect to Project Samhita of the CD. There are no ground to initiate any contempt proceedings against the Adjudicating Authority. The Contempt Application is devoid of any merit and is accordingly dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The judgment revolves around the following core legal issues:

• Whether the Adjudicating Authority committed contempt of court by allegedly violating the National Company Law Appellate Tribunal's (NCLAT) order dated 13.01.2021 while admitting a Section 7 application on 24.08.2023.
• Whether the Applicant, an Ex-Resolution Professional (RP), has the locus standi to claim unpaid Corporate Insolvency Resolution Process (CIRP) costs from projects other than the one he was initially appointed for.
• The applicability of the limitation period under Section 20 of the Contempt of Courts Act, 1971, concerning the filing of the Contempt Application.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Alleged Contempt of Court by the Adjudicating Authority

• Relevant Legal Framework and Precedents: The legal framework includes the Contempt of Courts Act, 1971, specifically Section 2(b) defining civil contempt, and Section 12 providing for punishment. Precedents from the Supreme Court emphasize that contempt must involve "wilful disobedience" of a clear and unequivocal court order.
• Court's Interpretation and Reasoning: The Tribunal found no evidence of wilful disobedience by the Adjudicating Authority. The order dated 24.08.2023 was passed in response to a Section 7 application by financial creditors, an action within the statutory rights under the Insolvency and Bankruptcy Code (IBC).
• Key Evidence and Findings: The Adjudicating Authority's order was based on the findings of debt and default, and the Tribunal did not find any contempt in the order's execution.
• Application of Law to Facts: The Tribunal applied the definition of civil contempt and found no deliberate flouting of the order dated 13.01.2021.
• Treatment of Competing Arguments: The Applicant argued that the order dated 24.08.2023 violated the protection of fees and costs as per the 13.01.2021 order. The Tribunal dismissed this, noting the Applicant's lack of locus standi in other projects.
• Conclusions: The Tribunal concluded that no contempt was committed by the Adjudicating Authority in admitting the Section 7 application.

Issue 2: Locus Standi of the Applicant for Unpaid CIRP Costs

• Relevant Legal Framework and Precedents: The IBC and relevant case law on project-wise insolvency processes were considered. The Tribunal referenced previous orders affirming the Applicant's lack of standing in other projects.
• Court's Interpretation and Reasoning: The Tribunal reiterated that the Applicant's claims for unpaid CIRP costs should be pursued in the original CIRP proceedings (CP(IB)No.84/BB/2019) and not in subsequent projects.
• Key Evidence and Findings: The Tribunal noted previous dismissals of the Applicant's claims in other projects and the Supreme Court's dismissal of the Applicant's appeal.
• Application of Law to Facts: The Tribunal applied the principle that the Applicant's entitlement to fees was limited to the project for which he was appointed as RP.
• Treatment of Competing Arguments: The Applicant's argument for extending his claim to other projects was rejected based on prior judicial findings.
• Conclusions: The Tribunal upheld earlier decisions that the Applicant has no locus standi to claim costs from projects other than Dreamz Sumadhur.

Issue 3: Limitation Period for Filing Contempt Application

• Relevant Legal Framework and Precedents: Section 20 of the Contempt of Courts Act, 1971, sets a one-year limitation period for initiating contempt proceedings.
• Court's Interpretation and Reasoning: The Tribunal found the Contempt Application filed within the limitation period, as it was submitted within one year of the order dated 24.08.2023.
• Key Evidence and Findings: The Tribunal considered the timeline of events and filings.
• Application of Law to Facts: The Tribunal determined the Contempt Application was timely, thus eligible for consideration on merits.
• Treatment of Competing Arguments: The Applicant argued for a continuous cause of action, which the Tribunal acknowledged but ultimately found irrelevant to the merits.
• Conclusions: The Tribunal proceeded to examine the merits of the Contempt Application, finding it filed within the statutory period.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning:
  
  • "The steps taken by them in CIRP and fees paid/payable in terms of Impugned Orders, shall be protected." (Order dated 13.01.2021)
  • "A contempt action being in the nature of quasi-criminal proceeding the degree of satisfaction that must be reached by the court to hold a person guilty of commission of contempt would be akin to what is required to prove a criminal charge, namely, proof beyond reasonable doubt." (Supreme Court in T.C. Gupta vs. Bimal Kumar Dutta)
  
  
• Core Principles Established:
  
  • Contempt must involve wilful disobedience of a clear court order.
  • The Applicant's entitlement to fees is limited to the project for which he was appointed as RP.
  • Section 7 applications under the IBC are statutory rights of financial creditors and do not inherently constitute contempt.
  
  
• Final Determinations on Each Issue:
  
  • No contempt was committed by the Adjudicating Authority in passing the order dated 24.08.2023.
  • The Applicant lacks locus standi to claim unpaid CIRP costs from projects other than Dreamz Sumadhur.
  • The Contempt Application was timely filed but lacked merit.